With the fiscal cliff deadline less than 12 hours away to make a possible agreement to avert tax hikes, Obama said a deal was in sight, but not yet done.

Speculation from Capitol Hill suggests a deal may be in place to set tax hike rates at $400,000 for individuals and $450,000 for couples, with a permanent extension on the existing rates for those who fall below those thresholds.

Also on the table are unemployment benefits, which could be extended for a year, as well as education, child and income tax credits. No new spending cuts seem to be part of the deal.

The final sticking point between Democrats and the GOP appears to be the spending cuts required by the sequester deal, which comes from last year's debt ceiling agreement. However, officials on both sides of the aisle have been expressing concerns that the deal goes too far or not far enough.

OBAMA: Hello, everybody.

Thank you. Please, everybody have a seat.

Well, good afternoon, everybody. Welcome to the White House.

(UNKNOWN): Thank you for having us.

OBAMA: Now I realize that the last thing you want to hear on New Year’s Eve is another speech from me, but I do need to talk about the progress that’s being made in Congress today.

For the last few days, leaders in both parties have been working toward an agreement that will prevent a middle-class tax hike from hitting 98 percent of all Americans starting tomorrow.

Preventing that tax hike has been my top priority, because the last thing folks like the folks up here on this stage can afford right now is to pay an extra $2,000 in taxes next year. Middle-class families can’t afford it. Businesses can’t afford it. Our economy can’t afford it.

Now today it appears that an agreement to prevent this New Year’s tax hike is within sight. But it’s not done. There are still issues left to resolve, but we’re hopeful that Congress can get it done. But it’s not done.

And so part of the reason that I wanted to speak to all of you here today is to make sure it that we emphasize to Congress, and that members of both parties understand that all across America this is a pressing concern on people’s minds.

Now, the potential agreement that’s being talked about would not only make sure the taxes don’t go up on middle-class families, it also would extend tax credits for families with children. It would extend our tuition tax credit that’s helped millions of families pay for college. It would extend tax credits for clean energy companies that are creating jobs and reducing our dependence on foreign oil. It would extend unemployment insurance to 2 million Americans who are out there still actively looking for a job.

I have to say that ever since I took office, throughout the campaign, and over the last couple of months, my preference would have been to solve all these problems in the context of a larger agreement, a bigger deal, a grand bargain, whatever you want to call it, that solves our deficit problems in a balanced and responsible way, that doesn’t just deal with the taxes, but deals with the spending in a balanced way so that we can put all this behind us and just focus on growing our economy.

But with this Congress, that was obviously a little too much to hope for at this time.

It may be we can do it in stages. We’re going to solve this problem instead in several steps.

Last year, in 2011, we started reducing the deficit through $1 trillion in spending cuts. Those have already taken place. The agreement being worked on right now would further reduce the deficit by asking the wealthiest 2 percent of Americans to pay higher taxes for the first time in two decades. So that would add additional hundreds of billions of dollars to deficit reduction. So that’s progress, but we’re going to need to do more.

Keep in mind that just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans. Obviously, the agreement that’s currently discussed would raise those rates, and raise them permanently. Now...

But keep in mind we’re going to still have more work to do. We still have deficits that have to be dealt with. We’re still going to have to think about how we put our economy on a long-term trajectory of growth, how we continue to make investments in things like education, things like infrastructure that help our economy grow.

And keep in mind that the threat of tax hikes going up is only one part of this so-called fiscal cliff that everybody is talking about. What we also have facing us, starting tomorrow, are automatic spending cuts that are scheduled to go into effect.

And keep in mind that some of these spending cuts that Congress has said will automatically go into effect have an impact on our Defense Department, but they also have an impact on things like Head Start. And so there are some programs scheduled to be cut that we’re using an ax instead of a scalpel. May not always be the smartest cuts. And so that is a piece of business that still has to be taken care of.

And I want to make clear that any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced, because, remember, my principle always has been let’s do things in a balanced, responsible way. And that means the revenues have to be part of the equation in turning off the sequester and eliminating these automatic spending cuts, as well as spending cuts.

Now, the same is true for any future deficit agreement. Obviously we’re going to have to do more to reduce our debt and our deficit. I’m willing to do more, but it’s going to have to be balanced. We’re going to have do it in a balanced responsible way.

For example, I’m willing to reduce our government’s Medicare bills by finding new ways to reduce the cost of health care in this country. That’s something that we all should agree on. We want to make sure that Medicare is there for future generations. But the current trajectory of health care costs has gone up so high, we’ve got to find ways to make sure that it’s sustainable.

But that kind of reform has to go hand and hand with doing some more work to reform our tax code, so that wealthy individuals, the biggest corporations, can’t take advantage of loopholes and deductions that aren’t available to most of the folks standing up here; aren’t available to most Americans.

So there is still more work to be done in the tax code to make it fair, even as we’re also looking at how we can strengthen something like Medicare.

Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone -- and you hear that sometimes coming from them, that sort of after today we’re just going to try to shove only spending cuts down, you know, well -- shove spending -- shove spending cuts at us...

... that will hurt seniors, or hurt students, or hurt middle- class families without asking also equivalent sacrifice from millionaires or companies with a lot of lobbyists, et cetera. If they think that’s going to be the formula for how we solve this thing, then they’ve another thing coming. That’s not how it’s going to work. We’ve got to do this in a balanced and responsible way. And if we’re serious about deficit reduction and debt reduction, then it’s going to have to be a matter of shared sacrifice. At least as long as I’m president. And I’m going to be president for the next four years, I hope. So...

So anyway, for now -- for now, our most immediate priority is to stop taxes going up for middle-class families, starting tomorrow. I think that is a modest goal that we can accomplish. Democrats and Republicans in Congress have to get this done. But they’re not there yet. They are close, but they’re not there yet.

And one thing we can count on with respect to this Congress is that if there is even one second left before you have to do what you’re supposed to do, they will use that last second.

So as of this point, it looks like I’m going to be spending New Year’s here in D.C. You all are going to be hanging out in D.C. too.

I can come to your house? Is that what you said? I don’t want to spoil the party.

But the -- the people who are with me here today, the people who are watching at home, they need our leaders in Congress to succeed. They need us -- they need us to all stay focused on them. Not on politics. Not on, you know, special interests. They need to be focused on families, students, grandmas, you know, folks who are out there working really, really hard, and are just looking for a fair shot, and some reward for that hard work. They expect our leaders to succeed on their behalf. So do I.

And so keep the pressure on over the next 12 hours or so. Let’s see if we can get this thing done. And I thank you, all. And if I don’t see you, if I don’t show up at your house...

I want to wish everybody a happy New Year. Thank you very much. All right.

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